Intangible Valuation
Value, contrarian, coat tail rider, idiosyncratic research

Capital Southwest Corporation: $1.00 For $0.61

Capital Southwest Corporation (NASDAQ:CSWC) is a holding company of various investments in public and private corporations. It also happens to be an undervalued security. It has net assets of $628m -- assets which are investments measured at fair-value. Its market capitalization, plus its debt, less its cash -- i.e., its enterprise value -- is $386m. This $242m divergence is irrational and not "normal" as some discounts to book appear. There is no reason, besides poor historical returns, for a business to sell at a 40% discount to tangible book. Purchasing the shares of Capital Southwest is like trading $0.61 for $1.00. We all know that the market price doesn't equal value but normally it is the "value" concept,...

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